What does the EU's and China's rise spell for the US?
If by 2050 the Chinese and European economies are indeed larger than America’s, then this is no need for concern. The United States (US) has been the recipient of decades of economic supremacy, as it escaped World War II (WWII) with its economy largely intact. This was in opposition to Europe, whose land saw lots of fighting -- the economies of the nations of Europe suffered for it. Half of Europe was under the yoke of Communism. The destruction of Western Europe’s infrastructure took decades to restore, mostly through American largesse. Europe was bolstered from both economic and political expediency: America needed strong, robust Western European economies to counter the growing threat of the Soviet Union (USSR) and its Eastern European satellites.
Though China did take some licks during WWII, their slow development was not caused by war but rather by their Communist Party’s reluctant embrace of capitalism. Their transition from a planned to a market economy has been relatively smooth and certainly quite extraordinary. China has become an economic powerhouse, with more than one billion producers and consumers, along with a rapidly rising standard of living.
During the 1990s, America and China became stalwart trading partners. Under US President Bill Clinton, China became the primary off-shore, low-cost manufacturing hub for American products. Since then, the trade deficit with China has ballooned, in that America imports far more from China than they do from the US. This fact can be quite worrying, except that this is an arrangement that brings low-cost products to American shelves. Wal-Mart imports the majority of its merchandise from Chinese factories, and by itself provides thousands of jobs to Chinese workers. Author Thomas Friedman chronicled this interdependence in his book The World Is Flat, stating that without Chinese products the global economy would grind quickly to a halt. This trading arrangement -- raw materials to China and finished merchandise to America -- has sewn the Chinese and American economies together for mutual benefit.
Through trade, European nations are also heavily invested in American success. Microsoft maintains a programming hub in Dublin, Ireland. While Dubliners have traditionally left Ireland for work, now they are able to stay in their home nation and command the same pay without uprooting their families to London or Seattle. This is a benefit to the Irish economy as well as Microsoft’s bottom line, as Irish computer programmers pay higher taxes and spend their money in-country. Microsoft and its Dublin employees are engaged in a mutually beneficial arrangement.
Direct foreign investment is helping both China and the EU prosper. With the fall of the Soviet Union, many former Communist nations have joined the EU. By opening factories and markets in these former Soviet bloc nations to capitalism, these nations have also become the recipients of foreign direct investment. Always seeking another source of income, investors have flocked to Eastern European nations like Romania, Estonia, and Poland. The foreign money develops their infrastructure for mutual benefit. The city of Tallinn, Estonia, has become a manufacturing and trading hub for central and northern Europe. The added political stability afforded by Estonia’s EU membership makes investment in Estonia a much surer investment. All of Europe is on the rise, thanks to foreign direct investment.
China has been as successful as Europe in using other people’s money. Investors salivate at the opportunity to break into a sales market more than a billion strong. Foreign investment firms invest heavily in China. From cellular phones to paper products, China is seeing the benefit of cheaper, more reliable products and services for its people, raising their living standards to where the Chinese people will demand better cars, furniture, and personal electronics. This increases demand for foreign products, bringing more parity to the trade deficit between America and China.
China and the European Union (EU) are on the rise. This does not mean that the United States (US) is on the decline. Quite the contrary: this rising tide will raise all boats. All three political units have benefited from this economic development. Europe and China enjoy cultures of prosperity. Success brings peace; economic interdependence will reduce China’s potential to wage war with America. In addition to receiving millions of dollars in revenue from American product manufacturing, China holds the majority of American debt. China is confidently invested in America’s future. This prevents conflict with the US -- why would China shoot its golden goose? America’s future is brighter because of the economic rise of Europe and China.